W.Va. customers’ health insurance subsidies in peril

A ruling issued by a federal appeals court Tuesday has called into question whether West Virginia will be able to offer health insurance subsidies through the Affordable Care Act.

In its decision, the U.S. Court of Appeals for the District of Columbia Circuit ruled that states that partnered with the federal government to create an ACA insurance exchange were not eligible to offer consumer subsidies, finding that the law as written allows subsidies only for exchanges “established by the state.” West Virginia, which operates a partnership marketplace that gives some responsibility to the federal government, is one of 36 states with an exchange that is fully or partially federally run.

In a contradictory ruling also issued Tuesday, the Fourth Circuit Court of Appeals, which includes Maryland, North Carolina, Virginia and West Virginia, upheld the portion of the law that grants subsidies. The Obama administration has already said it will appeal the D.C. court’s ruling.

“It is our understanding the D.C. Circuit and the Fourth Circuit have reached conflicting conclusions with respect to certain tax issues raised by the Affordable Care Act,” Chris Stadelman, communications director for Gov. Earl Ray Tomblin, wrote in an email. “We continue to review today’s decisions and will monitor future court action related to the Affordable Care Act.”

Split appeals court decisions are a classic route to the Supreme Court. But in this situation, it’s far from clear what will happen because the administration still has a legal card to play.

Since the Washington case was decided by a three-judge panel, the administration will ask the full 11-member appeals court to hear the case. The full U.S. Court of Appeals for the District of Columbia Circuit has seven judges appointed by Democratic presidents, including four by Obama.

If the full court comes out in favor of the administration, the prospect of Supreme Court involvement would be greatly diminished. On the other hand, if the full Washington court stays out of it or, after a hearing, essentially leaves the panel’s decision in place, then the Supreme Court would almost certainly weigh in.

David Klemencic, the owner of Ellenboro Floors in Ellenboro, West Virginia, was one of the plaintiffs in the D.C. Circuit case. Klemencic is the sole proprietor of his business and has no employees, and according to the suit, makes roughly $20,000 per year. Without the subsidies offered by the federal government, Klemencic would be exempt from the ACA’s individual mandate, as his health-care premiums would exceed 8 percent of his annual income.

“It was going to put me out of business,” he said. “It would have forced me to buy health insurance, and my store is in Ellenboro, where there are only 385 people — only enough of a customer base to barely make a living. If I had been forced to start paying for health insurance, there’s no way I could turn a profit for such a small shop.”

Perry Bryant, executive director of West Virginians for Affordable Health Care, said the D.C. ruling, if upheld on appeal, could have sweeping implications for the law.

“If you were to take away the subsidies, the premiums would be unaffordable for most people,” Bryant said. “Then the question becomes, if the premiums are unaffordable, can you really impose the individual mandate? And if you can’t impose that individual responsibility, can you require insurance companies to cover pre-existing conditions if not everyone is in the system?”

Individuals who earned up to 400 percent of the federal poverty level are eligible for subsidies under the ACA. That covers 86 percent of West Virginians who have applied for coverage through the ACA marketplace, said Renate Pore, the health policy director for WVAHC.

“More West Virginians would qualify for assistance than any other state in the country, so we will clearly lose an opportunity — not so much our government, but the citizens of the state will lose out on health-care security they deserve,” Bryant said.

The state also surged in its Medicaid enrollment — nearly 154,000 state residents had enrolled in Medicaid or the Children’s Health Insurance Program between Oct. 1 and April 30. Another nearly 25,000 had enrolled through the insurance marketplace with private insurance plans; the two combined account for roughly one-tenth of the state’s total population.

The average value of the subsidies equals $4,000 per person per year, according to Pore — a total subsidy of around $100 million for the 25,000 who enrolled last year. For those Americans who enrolled in insurance through the ACA last year, the average monthly premium was $86 — 76 percent less than the full premium, according to The Wall Street Journal, which cited information from the U.S. Department of Health and Human Services.

“Some of that money goes to insurance industry profits, some of it goes to all of the transaction costs, advertising; some of it will go to the health-care system — it will reduce the cost of uncompensated care,” Pore said. “It has a huge ripple effect.”

“We believe that this decision is incorrect, inconsistent with congressional intent … and at odds with the goal of the law: to make health care affordable no matter where people live,” Pierce said in a statement.

In Richmond, the three-judge 4th U.S. Circuit Court of Appeals panel was unanimous in its decision upholding the law’s financing. That court said the IRS did a reasonable job of interpreting legal language that is “ambiguous and subject to multiple interpretations.”

In a concurring opinion, Judge Andre Davis used pizza as an analogy. He wondered what would happen if he were to ask a friend for ham and pepperoni pizza from Pizza Hut, adding that Domino’s would be fine as well. If the friend came back with Domino’s, that would fulfill his request, he wrote.

The seemingly arcane issue could be crucial to the success of the health law because most states have been unable or unwilling to set up their own exchanges. The inaction stems in many instances from opposition by Republican governors to the Affordable Care Act.

It all revolves around four words in the 900-page law, which says tax credits to help pay premiums are available to people who enroll through an exchange “established by the state.”

The challengers to the law say a literal reading of that language invalidates the IRS subsidy to people in the federal exchanges.

The Obama administration and congressional and state legislative supporters of the Affordable Care Act say the challengers are failing to consider the words of the statute in its entirety.

The Supreme Court has considered several challenges to the health-care law, most recently ruling that some private companies don’t have to cover birth control if it offends religious scruples. The biggest ruling came in 2012, when a divided court let stand the law’s core requirement that most Americans carry health insurance or face fines.